In the recent years, the increasing cases of trade secret infringement due to talent flow cover a large proportion of trade secret cases heard by the people’s courts, which prominently focus on (1) serving staff violating duty of loyalty and infringing company’s trade secret by means of part-time job; and (2) key positions ex-serving staff providing services to competitors or participating in their own business that competes with the ex-employer. This article aims to discuss the issue of trade secret protection in talent flow.
1)The Consideration and Term of Confidentiality Duty
Confidentiality duty, which is derived from the duty of loyalty, is the main obligation to employees in employment relation. Employers, strictly, are not supposed to compensate employees for their assuming the duty; however, provided confidentiality fee has been stipulated between the employer and employee, compensation shall be paid under the agreement. Employers shall not use lack of such legal obligation as defense.
Besides, we often see the term of period of confidentiality duty, such as employers are subject to confidentiality duty for two years following termination of employment in legal practice. Such agreement, however, in our opinion is not very appropriate. On one hand, confidentiality duty is a main obligation to employee in employment relation, which still lasts even though employment relationship has been terminated. Confidentiality duty period, to some extent, makes a limitation to the right of employer. On the other hand, since trade secret is deemed as employer’s property before it enters into the public realm, employee, as counterparty, has no right to infringe or disclose. Hence, the agreement on period of confidentiality duty shall be revised.
2) Proof of Trade Secret Infringement
The trial principle of trade secret infringement cases, in many parties’ opinions, is “similarity (or identical) + contact – legal source”. The defendant is supposed to bear the burden of proof as to the fact of “legal source” as long as the facts of the defendant are similar or identical and the counterparty has access to the trade secrets at his convenience have been proved. If the counterparty cannot prove the “legal source”, the counterparty shall be liable to infringement.
The aforesaid analysis, however, is not in compliance with the Interpretation of the Supreme People’s Court on Certain Issues Concerning the Application of Law in the Trial of Civil Cases Involving Unfair Competition. Pursuant to Article 14 of it, where a party alleges that another infringes its trade secret, the party shall bear the burden of proof as to the fact that the trade secret it has possessed is in conformity to the statutory requirements, that the other party’s information is identical or substantially identical to its trade secret, and that the other party has adopted unfair means. The evidence showing that the trade secret conforms to the statutory conditions shall include the carrier, specific content, and business value of the trade secret, and the specific confidentiality measures taken for the trade secret.
Therefore, the party shall bear the burden of proof as to the facts as below prior to requiring the counterparty to prove “legal source”, or it seems to require the counterparty to prove his own innocence that is against the principle of civil law.
(1) Proving that they are the legitimate holders of trade secrets; and
(2) The other party has adopted unfair means.
3) Identification and Protection of Customer List
Customer list is one of the most common and important trade secrets to all corporations. Unfortunately, not all the customer lists are deemed to as protected trade secrets. In compliance with Article 13 of the Interpretation of the Supreme People’s Court on Certain Issues Concerning the Application of Law in the Trial of Civil Cases Involving Unfair Competition, the customer list that is a trade secret shall generally refer to special customer data that is different from relevant public information, such as the names, addresses, contact information, habits, intentions, and contents of transaction of the clients, etc. It includes a customer list with the names of many customers /clients, and specific customers/clients with whom a long-term stable trade relationship has been established. Hence, only the compile of the contact information of customers cannot constitute the customer list protected by the Interpretation. In summary, the undisclosed habits and contents of transaction, except the names and contact information of corporations which can be obtained publicly, are the substantial contents of a protected customer list.